Three More Ways I Make Extra Money

piggy bank copyA good side gig greases the wheels of your budget, creating a little free cash to accelerate debt elimination or bump up your fun money category.

Since I last posted about earning extra money I’ve developed three new side gigs of my own. I share them to spark your thoughts about adding to your budget’s biggest category.

1. Bookkeeping for a Buddy

When I sold my share of the business to my former partner (and still good friend), he lost his “books guy” – me. He never got into the habit himself, so when it was time to do the books for this year’s taxes, he hired me. Once I’d built his P&L and Balance Sheet for him, I offered to contininue maintaining his books for $100 per month.

He uses YNAB in his personal finances, making it easy to set up a business budget file, share it through Cloud Sync, and keep his transactions current. The gig takes me about two minutes per day, five days per week. And it’s nerdy budget fun.

2. Website Disaster Prevention and Recovery

This is a reasonably simple gig with a technical-sounding name.

My clients all use WordPress (same platform as this blog). I charge them $25 per month, which covers:

1. A full daily backup of their website.
2. Monitoring for malware attacks by hackers.
3. Emergency support if anything on their site breaks.

Sounds complicated, right? It isn’t. Yes, you do have to have the technical skills to fix a broken WordPress site. I’ve been working with WordPress for a few years; I rarely run into a problem I can’t solve (and I’m not a programmer).

The sneaky part of this service is the fact that I just go to third parties to buy the backups and malware monitoring. I set up accounts for each client, tack a little extra onto the price to cover the emergency support part of the business, and bundle the whole thing as my “WordPress handyman” service.

My clients know they could set these services up for themselves, but they choose to pay me because it reduces their mental overhead and time risk. If something – anything – breaks down with their site, they just email or text me and I’m on it. That’s the value-add. Nerdiness for fun and profit.

3. Website Assembly and Customization

The key point with this gig is that it’s not web design or web development. It’s website assembly. People like Adam do website design and development. People like Jesse hire people like Adam.

The niche here is working with clients who need a clean, presentable website but don’t have thousands of dollars to invest in someone with Adam’s experience and ability. They hire me to assemble a functional site from existing components (WordPress plugins and WordPress themes). It’s only a few hours of work for me, so it’s only a few hundred dollars for them. And, again, it’s nerdy fun.

I’ll also have clients hire me for one-off tweaks or cutomizations to their sites. I bill $50/hour for that kind of thing.

I realize many people don’t have the skills (today) to run with my second and third side gigs – but many (most?) of you could do “bookkeeping for a buddy.”

There’s no need to overstate your ability or your value, either. I’m not claiming to be a tax professional (gig 1) or a full-blown web developer (gigs 2 and 3). I’m using skills I’ve developed to save my clients a little time and headache.

Think you could run with any of these ideas to make a couple hundred bucks each month?

Short on cash? Sell your stuff.

piggy bank copyKate and I have come to love CrossFit-style workouts over the last few months. We’ve had an in-kind membership at the local “box”, but the owner of the gym has decided not to do trades for memberships anymore (which I don’t begrudge him; I think it’s a wise move).

Problem is, Kate and I find ourselves irritable and a little depressed if we don’t start our mornings by picking heavy things up off the ground. So, we’re looking to get our own little CrossFit gym set up in the garage.

Yes, you can do some things on the cheap. These sandbags actually work really well, and I’ll be making a couple heavier ones to integrate into our workouts.

But most CrossFit gear is pricey. You can find it used if you’re very patient. We’ve decided we don’t want to miss a couple of months of exercise while we watch the local classifieds for used gear, so we’re going to buy much of our our CrossFit starter kit new. Our “getting started” list totals about $800.

But where will the money come from? Selling stuff.

Kate and I have never been buyers or sellers of used stuff (ie we’ve wasted a lot of money), and we’re excited to leverage our junk into useful equipment.

Here’s what we found we could sell:

*Suddenly it seems like I’m trying to sell you my stuff. I’m not; I just throw this list out in hopes of inspiring your own list of stuff you could sell. 

Treadmill: $500

We bought this for $2,500 6 years ago, and used it a ton, but our interests have shifted toward weight-based exercise. Yes, I find it hilarious that we bought a $2,500 treadmill, but it is a really nice one.

TV: $300

Bought for $500 about 10 months ago (after my daughter smashed the old TV with a sippy cup). We’re only using the TV about 3 hours per week right now, and we can use a computer monitor instead.

“Bob” jogging stroller: $100

Bought for $350 six years ago. Nobody in our family is willing to ride in it anymore. Well, I’m willing, but no one seems up for the job of pushing me around in the thing on our Sunday afternoon walks.

Down comforter: $40

I think Kate paid $100 for this a few months back, and we never use it (even now that the thermostat is set to 64 at night). Interesting sidenote: did you know the cover of the comforter is considered a totally different thing? Fascinating. Apparently we’re only selling the comforter, and not the cover thing.

“Insanity” workout DVDs: $30

Already sold them. I felt so entrepreneurial and savvy turning my stuff into cash.

Surround sound system: $50

I bought this for $200 seven years ago and have barely used it.

Mark’s Android Phone: $40

Exciting developments here: I no longer need my Android phone. I think that’s all I can say for now. :)

Total (hoped for) Profit: $1,060

Two questions for those of you who’ve sold your stuff before:

1. What were some of your most profitable items? Any tips for getting top dollar for your stuff?

2. What do you think of my prices? Think I’ll get what I’m asking for this stuff?

Here’s to emptying out the basement and storage unit for fun and profit.

How much does your job cost?

speech_bubbleTo be clear: In this post I share my perspective, but don’t hold it out as right. The goal is to evaluate the costs and benefits of your job from your perspective.

It’s also important to note that these conversations (deep dives about our financial circumstances and how they relate to our savings rate) are more about trajectory (which way am I pointing) than position (judging where we are or aren’t) and velocity (how quickly or slowly we’re progressing toward our ideal).

I hope to understand my current position, then establish a good trajectory, then think about velocity. So, let’s get on with it.

In the spirit of a budgetary deep dive, let’s talk about the costs and benefits of our jobs.

I’m odd; I like to set new year’s resolutions in October (I promise this relates). When I set a new year’s resolution it’s going to impact one of four main aspects of my life: physical, emotional/spiritual, mental, and financial. Why not evaluate the benefits of a job in those terms?

Physical: What are the physical benefits of your job? Do the circumstances of your job encourage you to eat better, move more, rest more and better?

Emotional/Spiritual: How does your job improve your mood? How does your job make it easier to create and maintain meaningful relationships?

Mental: What skills and experiences is your job providing that you’d have a hard time getting elsewhere? How does your job challenge and stimulate you intellectually?

Financial: How much money does your job put in your pocket? Assign a dollar value to those benefits your job gives you that you’d likely be spending money on anyway, ie health insurance, company 401k contributions, and any perks like food, cell phone, etc.

My quick take on each of these would be:

Physical:

  • I’ve lost weight because my job is within walking/biking distance of my house.
  • My office also offers a standing desk (which is Jesse’s, and I use when he’s not in the office).
  • Because of the close proximity to my house, I very rarely eat out for lunch. It’s just a quick fifteen minute bike ride home for a PB&J with my family.

Emotional/Spiritual: 

  • My job has given me new relationships with interesting, caring people.
  • I enjoy quality conversation and interaction with Chance and Jesse at the office.
  • There’s nothing toxic about my workplace (gossip, jealousy, politics, etc).
  • The close proximity offers me time on my bike or on foot – which allows me quality meditation time several days per week.
  • I have autonomy and flexibility in how, when, and where I do my work (which strengthens my relationship with my wife and kids).
  • Supportive and grateful comments and emails from readers make me feel like my work matters, and give a healthy self esteem boost.

Mental:

  • Daily writing creates positive creative stress and requires study and introspection.
  • Discussion with the community challenges and refines my biases and perspectives on life and money.

Financial:

  • My job pays more than enough to cover my family’s needs (and plenty of luxuries), while also allowing for a 13% savings rate (which I can influence by further optimizing my expenses).
  • Because my job is results-focused, I’m also able to influence my effective hourly rate.
  • My employer makes a 401k contribution on every paycheck.
  • Jesse keeps the office stocked with protein shakes and bars, which come in very handy and further protect me from unnecessary eating out while at the office.
  • The annual company meetup adds some quality free travel to my life.

If any of that read as bragging, please take it as gratitude. I feel very lucky.

What about the costs of a job?

My YNAB job is extremely low-cost. It’s so inexpensive, in fact, that to talk at all about job costs I have to go to the job I had before joining YNAB. I was hired by another friend to manage web marketing for his pest control company. I was grateful for the job, and I worked with great people. The job just happened to be very expensive.

Your Money or Your Life asks us to consider these costs as they relate to our jobs:

Commuting: When I worked in the Utah office, the commute was about 20 miles each way. This made for high fuel bills and lots of time spent in the car (and traffic). When I traveled to the Raleigh, NC office, it meant driving to and from the airport, flying, being away from my family for days at a time, and eating out a lot.

In other words, it was costly in every way.

Costuming: I can wear anything I want to work at YNAB. We even offer a pants-free office environment (just kidding – maybe). I bought about $900 worth of clothes and shoes for the pest control job. Expensive (financial cost), and uncomfortable (emotional/spiritual cost).

Meals: Lots of eating out with the pest control job. Physically and financially expensive.

Daily Decompression: I worked with good people at the pest control company, but I’m pretty introverted. A busy office environment is a drain for me, and I found myself needing to hide out for a while when I got home from work. Mentally and emotionally costly.

Escape Entertainment: This takes into account things like cable TV with premium channels and nights out to “get away and unwind” – with the associated food and drink cost. It could also include retail therapy (“Work has been brutal lately; I’m going to treat myself to a new pair of shoes/new iPod/skis.”).

Vacations and Expensive Playthings:
“The last three months have been awful at work, so I told the kids I’d take them to Disney World.”

“I work a lot, so I bought a boat to improve my time with the kids.”

“My new motorcycle is my favorite way to get my mind off work.”

Important to note that this isn’t a negative judgment on leisure spending – just that portion of the spending driven by the “need to escape” job-related stress and fatigue. 

Job-Related Illness: All that commuting and stress can lead to sickness you wouldn’t otherwise have experienced.

How would you score your job? Remember, we’re trying to establish our current position (the costs and benefits of the job), then think about trajectory (whether and how we’d change direction).

The toughest question we get in live classes

bills“What if I don’t have enough money to pay all my bills?”

This is such a tough question. Having personally struggled financially in the past, my heart breaks when someone asks this. I know how tough it can be when things are that tight. I SO want to have a simple, easy answer that fixes everything. But that’s why it’s a tough question, there is no easy answer. I can’t say, “Oh just click on this button and you’ll be all set!”. I can’t say, “Oh, this rule will easily address that issue right now.”

This question is really one of two questions:

  1. What do I do when my expenses exceed my income?
  2. What do I do when the bills arrive before the money?

There are only two options: You either need to cut expenses or increase income. That’s it.

Start by cutting spending.

YNAB can really help with this. If you track your spending, you’ll see where the money is going and you’ll begin to notice places where you can cut back. That’s what happened to me. I couldn’t believe how much I was spending on eating out! I was essentially bleeding in that category. Tracking it created awareness and awareness created better decisions. I didn’t need a financial advisor to tell me to cut back there. Once I had the information in front of me in one place (YNAB’s Budget Screen), it was obvious.

I can not stress how helpful that was. Track your spending. Even if you feel you are assigning money to a category and then immediately spending it – you are still creating awareness. It’s worth it.

What should you do in the short term?

First, If a bill arrives and you really can’t pay it, you should contact the creditor and work something out. Communication matters. The worst thing you can do is ignore it. Give them a call. I’ve found most companies are willing to accept a smaller payment over no payment at all.

You’ll feel better if you call them and work out a solution. Really. You will. Facing it puts you in control, and knowing there’s a workable plan in place will reduce your stress about it.

Second, only budget the money you have and prioritize like crazy. Start by budgeting for immediate needs. You’ve got to eat but you don’t need to eat out. You also need gas in the car to get to work. (Getting to work is key since that creates more income.) So budget for immediate needs then start budgeting for bills. Which bills need to be paid right now? out of this check? Budget for those. Maybe budgeting for rainy day funds or the buffer aren’t possible right now. Take care of what’s in front of you first.

Third, avoid using your credit card to get you by. Think short term pain, long term gain. Break that habit as quickly as you can. Moving your mindset away from leaning on debt will help the shift to working with what you have.

What if cutting spending isn’t enough?

After a while you’ll have a record of your spending. At that point, you may find yourself in the situation I was in a few years back. I’d cut spending like crazy and I stopped using credit cards. This stopped the bleeding and then I was able to start working on debt repayment. But growing rainy day funds and a buffer were slow at best.

I remember sitting at the computer staring at the budget one day. I was trying to shift funds around to fix something. There was no wiggle room. That’s the first time I heard the budget speaking to me:

“Erin, you need more money. You aren’t earning enough.”

There was nothing else to cut – at least not without a negative impact on my quality of life. This was a hard pill to swallow, but at least I was making this decision armed with good information. I knew it was what I needed to do.

Since I was teaching music at the time, I started offering music lessons in the summer time. A lot of music teachers do this over the summer, and some of my students had asked about it in previous years. I set up a schedule that had me teaching out of my house two days a week for eight weeks of the summer school vacation. I put together an information packet and gave it out near the end of the year. I charged $40 an hour and $25 for a half hour lesson. This generated a couple thousand dollars over the summer. That helped me make progress on savings goals and sped up the debt repayment. It was also super fun.

I did this for a few summers and then ended up working for YNAB part time and that replaced the summer teaching. So…you could say acknowledging the need for more income set me on a path that led me to a career change and new job I love!   Just because something starts out as bad news (Yikes! I need another job.)  That doesn’t mean great things can’t come from it.

Think about what you could do. Everyone can do something! There are lots of ways to increase income. Mark said in a recent post that budgets are bones and income is muscle. Maybe that’s what your budget needs – a little more muscle.

Maybe cutting back will be enough, who knows? But don’t operate in the dark. Track. Prioritize. Tell your money what to do. You’ll be surprised how obedient your money becomes once you do.

One Simple Way to Incrementally Increase Your Income

bag of money

I think I raised a few eyebrows on Tuesday when I said I hope to create a $200,000 per year income within the next three years or so.

I even got this comment on the post:

“Hi Mark, my husband and I love your blogs and your transparency. Being in Christian paid ministry however seems like a challenge to grow our Income muscle. For example, we would never dream of asking a church to pay us 200K! Does this mean our retirement funds are doomed? Perhaps we need to be nicer to the kids? I would love to hear any thoughts from people who might work in non-profit organisations and how they look at their financial goals.”

Here’s the thing – I’m not talking about getting to $200k per year overnight. I may never get there. But income is my biggest budget category, so I’m giving it the focus it deserves. I’ll grow it incrementally. Here’s a quick story to illustrate:

About two weeks ago I walked into my wife’s CrossFit gym and approached the owner.

“You Ben?”

“Yep.”

“Hi, Ben, I’m Mark Butler. I’m a copywriter. I actually work for Jesse Mecham.” (Jesse, his wife, and a few other friends go to the same gym.)

“Oh, cool.”

“So, do you run a monthly newsletter for your members?”

“No.”

“Do you want to?”

“Actually, I get a few newsletters from other CrossFit gyms, and it’s something I’ve wanted to do. But I don’t write.”

“Yeah, that’s typical of most business owners. What would you think of letting me and Kate work out here in exchange for me producing a monthly newsletter to send to your members. I think it would help the community vibe and probably improve your retention.”

“Hm. I’m also going to re-do my website soon. Could you help me with the copy?”

“Yup.”

“Okay, so you and Kate each get a membership, and I get a monthly newsletter and you’ll help out with the copy for my new website.”

“Sounds great to me.”

“Great.”

We shook hands, and that was it. The entire exchange took about four minutes.

Now I get $190 per month worth of value in exchange for 2-4 hours of monthly work.

(And, as Jesse pointed out, I’d have to earn more than $190 per month to pay for the memberships, so I’m really coming out ahead. But my new love of bartering is a discussion for another day.)

The benefit of the four minute conversation goes way beyond the $190 gym membership. I’ll be more fit; I’ll make new friends (and maybe even some business contacts), and I’ve opened the door to writing for a few more of the 4,000 (or so) CrossFit affiliate gyms out there. Maybe I’ll parlay this one conversation into a healthy freelance income.

So here’s a formula for steadily increasing your earning power:

1. Decide to make more income. I don’t mean to sound trite – deciding to create more income creates the focus you’ll need to come up with ideas and recognize opportunities.

2. Develop a freelance-able skill like writing, graphic design, or web development (programming).

3. Start asking people if you can do services for them. Just. Start. Asking. If they say no – who cares? Ask someone else. The people who say no will give you the feedback you need to tweak your offer so the next person says “Absolutely.”

Learning graphic design or computer programming takes time. You already read and write english (probably), so why not just steal my idea and run with it?

Use my newsletter pitch with ten small business owners. If they don’t go for your $250 bid, see what they’ll pay. Even at $100 per month you’re still making $20 to $30 per hour, which is a great start.

(By the way, the reason the newsletter pitch is likely to pan out for you is that most small business owners know they should be sending a newsletter to their customers, but they want no part of it because, like Ben the CrossFit guy, they “don’t write.”)

Listen, the combined GDP of the USA, the EU, and Australia exceeds $30 trillion per year. I don’t think we’re taking a big mental leap by hoping to carve out a few hundred bucks extra per month for ourselves.  Are we?

For those who have any interest in this “produce newsletters for extra income” idea, I’m happy to share my ideas on how to make it work. If you’re interested, just leave a comment and we can hash it out right here in the comments on this post. 

Should You Become a Programmer?

computer

Last week I spent a lunch catching up with my former business partner (and still good friend). As we chatted about new projects, we both mentioned frustration with finding programmers to help us build the software we need to move our businesses forward.

It reminded me of a Dave Ramsey podcast I listened to a few months back where Dave spent a full five minutes of the show begging his listeners to help him fill fourteen programming positions in his company. These were good, high paying positions and he just couldn’t find enough applicants to fill them.

My friend and I agreed: if we could go back 10 years and develop one skill, it would be the ability to tell computers what to do (and have them respond correctly).

If you have an income problem – or a job satisfaction problem – you ought to think seriously about learning to code.

Jobs Aplenty

Sound crazy? Check out these stats from Code.org:

Having hired and worked with a few programmers over the last five years, I can add my own anecdotes to the hard data:

  • Entry level coders can earn $40,000 to $50,000 per year in their first full-time programming job.
  • I’ve seen salaries of $80,000 to as much as $120,000 per year for developers with 5+ years experience.
  • Tech companies are desperate to find talent. They don’t have a cash problem; they have a can’t-hire-programmers-fast-enough problem.

These are good gigs, too. Some of the perks I’ve seen include:

Remote working arrangements with total flexibility of work schedule. These companies don’t care whether you work at 2am or 2pm – just get your work done (this is how YNAB operates, and we’re not the only ones).

Lots of paid vacation time. My brother works for Automattic, where they let their developers know “we’re much less concerned with the strict number of hours you work, and much more concerned with the quality of your work.” And it’s not just lip service. My brother is required to take at least 25 days off per year to avoid boredom and burnout.

Company-purchased hardware, owned by the employee. Why not start a profession where your employer upgrades your tools for you every couple of years – but doesn’t require you to turn in the laptop when you move on to a new job?

Not All Rainbows and Butterflies

Having worked with and observed coders for a while now, I’d say some of the biggest cons to the profession are:

Ignorant, unappreciative employers and co-workers. If you’re coding for a company that’s not run by coders, you’ll spend energy helping management to understand the scope and complexity of the problems they’re asking you solve on ridiculous deadlines. When my brother and I worked together, the running joke between us was “This shouldn’t take more than a few hours – if you know what you’re doing.”

Non-technical managers have no clue how long a thing should take, or how hard the thing is to build. I expect this will improve as the managers become more tech-wise, but programmers are going to be fighting this battle for many years still.

My solution to this problem, by the way, is to hunt for companies with tech-friendly ownership and management who understand that coders are creatives, and need to be managed accordingly.

Boring projects. You’re not always going to have interesting projects to work on. At times, work will be pure drudgery. I’ve seen developers take simple, boring jobs and completely overbuild them simply to avoid the boredom inherent in the original assignment.

Yes, I realize this isn’t a tech blog, so this post may seem a bit out of place. But remember – income is your biggest budget category. Learning to program might open the door to more income and more satisfying income.

If you’d like to dip your toe in the world of programming, I recommend CodeCademy.com. It’s completely free and offers a broad set of introductory tutorials for the major programming languages.

Just food for thought.

 

Why do Most Serious Budgeters Neglect Their Biggest Category?

Why on earth don’t budgeters talk more about income? It’s your biggest budget category – bigger than all others combined (hopefully).

As YNABers we spend time each day, week, and/or month reviewing our spending: How are we on groceries, what’s left in the misc category, how soon until we can buy the thing we’ve been saving for?

Why wouldn’t we also spend a few minutes during that same meeting thinking about income?

Wasteful non-budgeters don’t benefit from pay increases the way budgeters do – our expenses are so dialed in that any bump to our pay makes a big difference to the bottom line.

In my case:

  • A 15% increase in income would cover all my Rainy Day categories (and that’s allowing for taxes and charitable contributions coming off the top).
  • Or…a 25% jump in income would cover my mortgage.
  • Or…a 35% pay increase would cover everything in my “Monthly Bills” master category (everything but debt service, savings, rainy day funds and charitable contributions).

Is it easy to bump your income 15% to 35%? Probably not – that’s a topic for another day. Salaried people tell me increasing their income involves performance and patience – but also politics and positioning. In other words, they have some influence over their income, but not a lot.

So what? Exert whatever influence you can. The return on effort toward increasing your income is much bigger than the return on figuring out how to cut your grocery budget by $50 per month.

Budgets are Bones; Earning Power is Muscle

Without your financial skeleton (budget), your muscles (income) are a worthless pile of mush. But if your money bones are strong, building your earning muscles lets you do more work (saving, paying off debt, and even spending) in less time.

Which is why that rare person who is both a dynamic earner and disciplined budgeter is so easily identified by his/her enormous smile and overflowing bank and investment accounts.

Can’t Retire? Who cares?

Wednesday’s retirement post alarmed people (me included). It’s not comfortable to realize you’re in no way, shape or form prepared to retire in the traditional sense.

In the comments on the post, saveourskills offered an alternate view:

“The idea of retirement is that you do something terrible now and when it is over you can finally enjoy life. To me retirement is a lie. Retirement is a mindset – not a goal.”

Jesse made a related comment after I published the post:

“I think this idea of ‘retirement’ started with the invention of Social Security – before that I’m pretty sure the idea was that you’d just keep working until you died.”

If you hate the idea of working until you die, your problem isn’t your savings rate. It’s your profession.

What if your income-generating hours made you happy? Challenged you? Taught you new things? Created and improved relationships?

If those were the conditions, would you ever want to stop?

“Sure,” you’ll say, “I’d love to enjoy my job, but I’m too entrenched. I have too much experience/too many bills/too much debt/can’t take the risk…”

Yes, you do. I’m not trying to diminish the reality of your responsibilities.

Can you transition to a new job (or completely new profession) tomorrow? No. Next week? Month? Year? I don’t know – maybe not.

But what if you set a goal of truly enjoying your work within two years? Or five? Still unrealistic? I doubt it.

I love this quote from Peter Drucker:

“We greatly overestimate what we can do in one year. But we greatly underestimate what is possible for us in five years.”

As budgeters, we’re uniquely capable of making this transition (however long it takes). We understand (or are discovering) our real expenses. We don’t overestimate the financial obstacles in our path (nor do we underestimate them).

We can say, with great clarity, what we’d need to earn from our new happy profession. We’d have far fewer stresses as we made the transition, because we wouldn’t be piling financial unknowns on top of the questions about changing the way we make our living. We can even start to use the 4 Rules to whittle away at our expenses in preparation for earning less money.

*But who’s to say we’d earn less money in the new profession? Why wouldn’t our happiness and enthusiasm for the job lead to more money? Not a guarantee, but not an impossibility.

A recipe for financial contentment:

1. Use a budget to live happily within your means. Budgets are freedom.

2. Save aggressively as insurance against permanent loss of income. Planning to work happily forever isn’t an excuse not to prepare for the ultimate rainy day.

3. Pursue enjoyable work to avoid feeling the need to stop earning money. Believe it’s possible; set a goal to love Monday within 2 to 5 years.

Can it be done?

Gravy Money (Side Money or Passive Income), and Why I Love It.

Gravy money is the money you earn, but on which you don’t rely–at all.

If your budget operates under the assumption that your quarterly bonus will definitely happen, and that the quarterly bonus will be used to pay off some credit card debt accumulated in anticipation of the bonus…that is not gravy money.

But if your quarterly bonuses are saved and used to purchase a rental property every three years. That’s gravy money. Gravy money should, most of the time, be used to create more gravy money.

With gravy money, you should never need it, but you should love making it.

In general, I prefer a stream of gravy money over a one-time shot.

In my opinion, gravy money should not be consumed, but should be used to purchase appreciable assets (real estate, alternative investments, starting a business, etc.). That is, of course, after you’re out of debt.

My First Gravy Money Stream

YNAB was my first stream of gravy money. At first, it was totally necessary, and helped us avoid going into debt while I finished school and Julie stayed home with our first (and second) child.

However, once I started my full-time job at an accounting firm, we no longer needed any YNAB money, and it all became gravy money.

We used that gravy money to purchase our first home much faster than we would have been able to otherwise. Thank goodness we hadn’t consumed it to bolster our lifestyle.

I ended up taking a job back in Utah, still afraid to use YNAB’s gravy money for supporting my family. That job lasted about four to five months, and then I realized YNAB could do the trick, and we started on that full-time I think toward the end of 2007.

New Gravy Money

With us now living on YNAB money for our livelihood, my conservative radar was beeping constantly. It didn’t take long before my desire for that gravy money led me to do some other internet-based work, where a friend and I would…basically flip websites. Buy them, make them perform better, and then sell them much-improved. (For those that care, we wouldn’t flip domains, we would flip actual websites.)

We were lucky with our timing, because within a few years, the field became fairly saturated. That gravy money, the buying and selling of websites, is what helped me and Julie pay off the house.

Having that second stream of something that’s (fairly) passive, can make all the difference.

Emergency Gravy Money

YNAB continued to grow, and I didn’t need to take as much out of it to live on, though our personal earnings were still all over the board. During 2009, we were investing so heavily in YNAB 3 that our personal financial situation deteriorated fairly rapidly. Our emergency fund was drained, and right before the launch of YNAB 3, I carried about $25,000 on a credit card.

I used the stream from the buying/selling of websites to keep us from going further into debt. If we didn’t have that gravy money (that quickly morphed into “we need this to stay afloat” money), we would’ve missed our YNAB 3 launch deadline by probably six months.

(A side lesson Iearned here is to never give a public launch date unless it’s something like, “We’re launching Tuesday!” because everything’s in place ready to go. Also, make sure Apple has approved your software before giving that type of public launch date.)

Gravy Money Dried Up, New Stuff Found

The buying/selling of websites kind of fizzled out, mainly because I wanted to focus more on YNAB, and my partner wanted to make some movies.

The lack of gravy money lasted about two months, before I partnered with a developer to begin developing some small iOS apps.

The developer didn’t end up lasting too long, but we launched about five related apps and they all-together, make a whopping $150 per month. (I ended up buying out the developer of his half to simplify things.)

What’s actually pretty intriguing about this small amount of gravy money, is how much I still enjoy it. Apple deposits the money monthly, into a bank account dedicated solely to these iOS apps. It climbs and climbs, ever so slowly, and I don’t give it a second thought. But I still love that it’s there.

More Gravy Money

About a year ago, my old business partner started buying/selling websites again. I didn’t have the time to invest in the nuts and bolts, but I decided to become a silent partner in the operation. That’s ended up providing some gravy money for us. It’s nothing we personally consume in our budget, so it just grows on the side, where I reinvest it there, or dedicate it toward another gravy money stream.

Even More Gravy Money

The stream I’ve been working on currently is with real estate. I am so far from a guru, it’s not even funny, but I’ve felt like there have been some buying opportunities, so about eight months ago I jumped on a short-sale opportunity and purchased our first rental property. I’m extremely conservative in my forecasting, but based on my analysis, the property should cash flow, provide reasonable equity appreciation, and provide a nice tax benefit from the depreciation.

I’ve set up a separate LLC (for liability reasons, nothing else), and bank account. The property manager sends me an accounting each month of any costs, their management fee, and the remaining proceeds land in the account. My plan is to obviously carry a buffer of 3-6 months’ rent, reserve 10% of rent specifically for eventual repairs, and anything above and beyond that high-water mark will be used to accelerate the mortgage paydown.

(A note on carrying a mortgage on the rental property: Dave Ramsey, a guy whose advice I like a lot—I mean, come on, he’s yelling at people all the time to get on a budget!—says that once you’ve paid of your personal residence, you shouldn’t borrow money ever again, even for another house. I’ve never quite understood the logic of this. It seems to me that if it’s too risky to carry a mortgage on a single rental home, then that’s the end of it, and you shouldn’t borrow money for your personal residence either. But this is just a tangent at this point. The fact of the matter is that I evaluated the risk of carrying a mortgage, recognize that we could handle the payment if we couldn’t find tenants for a really long time, and went for it.)

The Amount of Gravy Money Seems to be Irrelevant

I find myself excited at the prospect of fairly small amounts of gravy money each month. I get excited when I see a dividend be paid–even if it’s just a few dollars. I’m excited about a few hundred dollars of positive cash flow from the rental property, and I love seeing one of our website investments earn some commissions.

The size of the gravy money really does appear to be second to the fact that it exists in the first place!

Dual Incomes: Could One Be Gravy Money?

After interviewing many new YNABers in depth, I realized how big of an expense day care is to a lot of families. The search along those lines led me to a book called The Two Income Trap: Why Middle-Class Parents Are Going Broke, and one takeaway I have from that book is that the second income from a spouse used to be gravy, but doesn’t have that designation any longer.

If you have a 3-6 month emergency fund, then when a financial disaster strikes, you’re ready for it. But if you’re dealing with a longer bout of financial strain (job loss, disability), having a gravy money stream could mean all the difference.

Would it be possible for you to consider your spouse’s income as gravy money? Could you two reasonably pretend that the money simply does not exist? Possible? Totally impossible? I’m not even certain, but want to at least plant the idea of you having some money that is not ever needed, which can be used to produce more of its own kind.

Your Business as Gravy Money (to the extent possible)

There are so many “business skills” I don’t possess, but I feel I’ve cornered the market on one, and that is keeping my business separate from my personal finances. Julie used to be confused by statements like, “Man, the business is rocking it this month!” followed shortly thereafter by, “Our restaurant category is depleted, so let’s stay home to eat.”

Those kinds of apparently contradictory statements no longer confuse her :)

The ability to separate the money that’s for consumption, and the money that can be used to create more money, is invaluable.

I’ll give you two examples:

1. I imagine that I’ll eventually sell the business. At least, that seems logical. I’m not banking on the sale of the business, so any proceeds from that hypothetical sale are seen as very distinct from our retirement savings, where we contribute to a 401k and our Betterment account. In other words, the sale of YNAB would be gravy, not something I’m relying on in order to be able to retire.

2. Since I now budget the business money, it’s very easy for me to be motivated to not take any personal distributions. Why? Because if I take money out of the business for personal reasons, I’m eating the seed corn. I’d rather keep it in the business and be able to hire another developer, try a new marketing channel, or maybe just make our company meetup awesome.

Conclusion

In the end, I just want to get you thinking about what could be your gravy money. A portion of your spouse’s paycheck? Some overtime you pick up on a fairly regular basis? Those quarterly bonus checks? Your tax refund?

If it’s gravy money, that means you won’t ever need it, except to purchase appreciating assets (if you’re still paying down your debts, I’d use extra money for that).

You want gravy money to create more of its own kind. Don’t consume it! Plant it and watch it grow!

Post a comment below on what you could use for some gravy money, and how you’d use it to help it grow.